Skift Take

Places like Costa Rica and Panama have long welcomed backpackers, but they now seem to be rushing back to the region after travel restrictions were lifted in 2022.

Online travel agent Hostelworld is seeing demand soar for bookings across Central America, as it reports an uptick in bookings coming through its new app.

Backpacker-favorites like Costa Rica and Panama reached 150 percent of 2019 volumes during 2022, as the rest of the world trails behind. Costa Rica also launched its digital nomad visa in July which may have helped.

The hostel specialist’s top markets of western Europe were roughly back to pre-pandemic numbers, with Oceania and Asia recovered to 79 percent of 2019 levels in December, while long-haul bookings recovered to 76 percent by the year end.

The Central American surge was revealed on Wednesday, as the company reported its preliminary results for the year ended Dec. 31, 2022.

For March 2023, Hostelworld’s Central America bookings had climbed to just over 180 percent, compared to the 2019 average.

“After a slow start to the year driven by Omicron, booking demand recovered quickly towards 2019 levels into Europe (our largest destination); with many of our top markets in Southern Europe exceeding 2019 levels over the summer,” said CEO Gary Morrison in a statement on Wednesday.

Part of the pent-up demand could be from travelers could who were longing for serene mountain landscapes and pristine beaches during the pandemic, but also word of mouth through its new app.

Social Network Effect

Hostelworld added a series of new features to its app in April last year, including a networking platform called The Solo System. Other features allow guests to chat before and after their departure.

In March 2023, 55 percent of bookings were made by its “Social Network Members.” In April 2022, that number was 13 percent.

Social media is becoming a key resource for travel companies to use to market their brands, and Hostelworld seems to have found the right method with its in-house tools.

“When you look on a listing, we show you how many people are going to be at the hostel and what nationalities those people are going to be, plus how many people will be at the destination generally,” Johnny Quach, chief product officer and chief marketing officer, told Skift for the “Gen Z Is Influencing Hotels to Rethink Strategies” Deep Dive report. “But the really powerful thing happens when you make a booking. About two weeks before your trip, we put you into a chat room with everyone who’s going to be there at the same time in the city and everyone who’s going to be in your hostel around the time you’re there.”

In the preliminary results, Hostelworld describes itself as a “ground-breaking social network powered online travel agent focused on the hostelling category, with a clear mission to help travellers find people to hang out with.”

As well as boosting bookings, selling directly via its app will help lower its marketing and customer acquisition costs. Direct marketing as a percentage of net revenue amounted to 59 percent in 2022, compared to 76 percent in 2021. It expects that figure to drop further to 50- 55 percent in 2023.

Full year net bookings totalled 4.8 million for the 12 months, an increase of 228 percent year on year.

While net revenue for the year jumped more than 300 percent to $75.6 million for the 12 months, and the agency reached a profit of $1.4 million on an adjusted earnings before interest, taxes, depreciation, and amortization (or EBITDA) basis, it made an operating loss $14.6 million (compared to $35.7 million in 2021.)

A refinance process is currently underway for a $32.3 million term loan facility, expected to complete in 2023, which Hostelworld said will result in lower finance costs.


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Tags: costa rica, digital nomads, hostelworld, social media, solo travel

Photo credit: Bookings to Costa Rica surged in 2022. Ana Shuda / Unsplash

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